When the demand for U.S. dollars increases, the value of the dollar will increase or appreciate (Stone 2008, pp. 685). As a result, U.S. products become more expensive for foriegners causing a reduction in exports and increasing imports. This not only effects the U.S. economy, but also affects the economies in other countries. Monetary policies influence and are influenced by international developments, including exchange rates, and based on these market conditions the U.S. government can make strategic changes to these policies to maintain the country’s economic stability (full employment, stable growth and price stability).
In the first half of the year earnings for the Resources division have increased, due to higher export coal prices. * Operating in many different geographical areas * Being dependent on customers and supplier chains in each local and overseas areas, as well as different geographical areas of operations. This increases inherent risk due to difficulty to control operation in different locations as well as the climate changes in regards to their products. II. Unusual pressure on management The management is under unusual pressure to perform well and increase returns for shareholders in order to gain more remuneration: * Objective to provide a satisfactory return to shareholders, this would increase inherent risk due to pressure placed on management in order to meet budgets or forecasts * Remuneration plans * Also the directors have significant remuneration plans – they are awarded a lot of
A more difficult and time consuming effort Huffman could take to reduce exchange rate risk is to spin the rate to your advantage (Prinzel, 2013). This means when USD exchange rates are high, Huffman would need to ensure their customers are aware of the benefits they could be receiving in discounts. Relative to Huffman Trucking’s benefit with this approach, they could buy foreign exchanges when rates are low, similarly taking advantage of the same benefits their customers would
Supply and Demand Simulation Amanda Huenefeld ECO/365 Sadu Shetty January, 14, 2013 Introduction Supply and demand are the two influences that govern pricing in the larger picture of a viable economic market. The two factors are like two forces. Equally the conclusive levels of supply and demand, and the comparative levels of the two in contrast to one another, are significant. The standard of supply and demand is that if one or both varies, there will be a transient difference in the amount of product manufacturers are equipped to sell and the quantity that consumers are willing to buy. This difference will cause the market price to increase or decrease when necessary until the quantities are the same.
There are also other risks associated with manufacturing internationally. When a company is manufacturing its product internationally for sale in a domestic market the exchange rate must be taken into consideration when dealing with suppliers of the components necessary for production along with the cost of labor. Should the exchange rate fluctuate greatly it can increase the cost of manufacturing to a point where the resale (retail) cost domestically rises and the product is no longer competitively priced within the domestic marketplace. The Risk: 1. Product Recall: This is a
The size of financial flows depends heavily on the extent of Australian exports of goods and services. As more good and services are demanded from Australia, they must be paid for in the Australian dollar. Foreign consumers convert their currency to the AUD to pay for the goods or services, thus increasing the demand for the AUD and pushing the equilibrium price upwards, resulting in an appreciation of the AUD. Exports of goods and services from Australia is in a heavy relationship with international competitiveness of Australian firms. That is, the ability of firms in Australia to compete on the international market for the sale of goods and services.
If the interest rate is low, it will cause more funds to be available, greater expansion and increased employment. If the interest rate is high, it will cause fewer funds to be available, less expansion, and decreased employment. Fiscal policy is an important tool for managing the economy because of its ability to affect the total amount of output produced or the gross domestic product. The first impact of a fiscal expansion is to raise the demand for goods and services. This greater demand leads to increases in both output and prices.
As the Reserve increases interest rates, it effectively lowers the demand for money. Increasing the interest rates would be in the Reserves best interest when the nation is experiencing rising inflation. This type of monetary policy is called contractionary monetary policy (Hubbart, 869). On the other hand, to increase demand for money the Reserve can decrease the interest rate. Decreasing the interest rate effectively increases consumer and businesses consumption.
Total revenue equals price time’s quantity. It reflects total receipts obtained from selling a certain output or quantity of goods. Total costs is different it’s equal to fixed costs and variable costs. Fixed costs include building and equipment costs, regulatory fees and salaried personnel and remain stable, especially in the short term, but may vary with a longer time horizon. As the time horizon increases, variable costs rely less on existing factors and restrictions and therefore will begin behaving differently which will in turn affect the cost of production (Wright, 2007).
The elastic VS inelastic states that the law of demand depends by how much quantity demanded responds to a price change. When a price change causes larger change in quantity demanded then the price would be elastic. However when a price change causes smaller then the demand is elastic. The law of demand states that as prices raise the people would like to buy less and the quantity demanded falls. As the prices fall, the people would like to buy more and the quantity demanded increases.